The Company recently completed its second well in Lea County, New Mexico in partnership with the operator Cimarex. FieldPoint expects to drill its third horizontal well in Lea County, New Mexico in partnership with the operator Cimarex in the first half of 2013. FieldPoint has or will have approximately a 43.75% interest in these wells, Cimarex has or will have a 37.5% interest in the wells, and third parties have the remaining 18.75% interest. These wells typically have 500-700 Boe/d IP rate, have a 30 day average production rate of 600 Boe/d, and 360,000 BOE Estimated Ultimate Recoverable (EUR) over their life. As mentioned above, the cost of this well will be fully covered by FieldPoint's existing cash flow.
Another potential well opportunity over the next 12 months is in a leasehold that the Company has an ownership interest in and Concho Resources is the operator. This leasehold is in the Abo play and currently has two producing wells with at least one additional PUD. FieldPoint has approximately a 44% working interest and a 29% net revenue interest in the existing producing wells and would have the same interest in additional wells drilled in that leasehold.
FieldPoint is in its ninth consecutive year of profitability and positive cash flow. Due to its positive cash flows from operations, the Company has been able to maintain a very strong balance sheet with lots of dry powder, with a current ratio of 2.1. Debt levels over the past couple of years have remained flat to stable, and the Company has increased cash on hand over that time frame. According to FieldPoint management, it will have sufficient cash flow to meet all of its CAPEX requirements over the next 12 to 24 months without having to tap the debt or equity markets. However, the Company has covered its bases when it recently filed a shelf registration statement, allowing it to access the capital markets should the need arise.
FieldPoint's biggest challenge is competing for oil and gas leasehold properties with companies who have much greater resources than FieldPoint. These resources are becoming increasingly scarce everyday, creating inflationary pressures on lease prices. Despite these challenges, the Company has enjoyed success in its acquisition strategy and will maintain patience and strict underwriting discipline to avoid overpaying for reserves and properties. With respect to hedging commodity prices, the Company was hedged during the last six months of 2011 with a floor of $85 and a ceiling of $102.50. For the year ending December 31, 2012, the Company has been hedged with a floor of $95 and a ceiling of $110. FieldPoint management believes that oil prices have bottomed and that global demand from China, India and coupled with greater domestic demand will lead to higher energy prices over the next 12 to 24 months.
Overall, the Company has been very successful at executing its strategy as evidenced by over nine years of profitability, a compelling statistic in any industry given the economic turmoil over the past decade. The Company only has approximately 8 million shares outstanding (with 42% of total outstanding share held by insiders-94% of which is held by CEO Ray Reaves) and only approximately 4 million in the float. Based on its most recent quarter-over-quarter growth rate of 32.7%, the Company' shares trade at a PEG ratio of only 0.8. Based on a PV-10 value of $25.9 million as of 12/31/2011 (which will likely increase in its next 10K), FPP shares only trade at an 18% premium on a market cap basis.
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